Aave Labs Proposes V4 Isolated Hub for Institutional Custodied Collateral

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On September 14, Aave Labs proposed an Aave V4 Isolated Hub and Spoke to enable institutional adoption of custodied collateral for stablecoin borrowing. Institutional borrowers will deposit assets with Anchorage, which are represented on-chain as non-transferable custody collateral tokens (CoCT) via Chainlink’s CustodySync. Borrowers stake CoCT on the Spoke to withdraw stablecoins from the Isolated Hub, with the loan lifecycle and liquidations managed through Chainlink infrastructure. The design features a single Isolated Hub and Spoke governed by the Aave DAO, with no modifications to existing structures. Assets remain in Anchorage custody, and CoCT is a restricted ERC-20 token, initially supporting BTC. This update introduces on-chain infrastructure for institutional adoption in DeFi.

ChainCatcher report: On September 14, Aave Labs published an ARFC on the Aave Governance Forum, seeking approval to deploy a new Aave V4 Isolated Hub and Spoke to enable institutional custodied collateral to be used as collateral for stablecoin borrowing. Institutional borrowers will deposit collateral with Anchorage and maintain custody throughout the loan term; the custodied balance will be represented on-chain as non-transferable custodied collateral tokens (CoCT), minted and burned by CustodySync, a system designed by Chainlink. Borrowers will stake CoCT on the Spoke and withdraw stablecoins from the Isolated Hub. The entire loan lifecycle, including liquidations, will be synchronized between the custodian and Aave via Chainlink infrastructure. The proposal is limited to a single Isolated Hub and a single Spoke governed by the Aave DAO, with no modifications to existing Hubs, Spokes, or reserves. Underlying assets will never leave custody; Anchorage, as the custodian, holds the assets and acts as the account control protocol counterparty, while Chainlink does not hold any assets. CoCT is a restricted-transfer ERC-20 token, allowing minting and burning exclusively by CustodySync, with one contract per borrower position. The initial plan is to launch one CoCT for BTC held in custody by Anchorage. Next steps include ARFC discussion, followed by a Snapshot vote if supported, and submission of the final parameters as an AIP.

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